Singapore IRs Don’t Need Junkets?

Posted: January 14, 2011 in Uncategorized

14th Jan 2011

Contributed by:   Alan Kaplan

It was reported in the Lion City press that for the Singapore Integrated Resorts, up till to date there is still no news of authorized junket licenses to be issued by the Casino Regulation Authority (CRA).

Apparently Genting RWS had submitted several junket license applications and awaiting for approval by the CRA.  The authority concerned seems to take the matter more seriously than expected.  According to CRA, junket applications should be carefully reviewed for any criminal background, as huge sum of money is channeled through this operational platform. 

The comment from HSBS analyst Sean, is that “These are the two most expensive casinos on the planet and they are the most profitable… Why do they need junkets?”  It is quite ignorance of this analyst to question the value of junkets in Asian casino landscape indeed.  Unless an Asian casino does not target to grow its VIP gaming market share and topline revenue, Asian junkets are the necessary channel to sustain high-roller business.  Macau is a case in point.

Singapore’s ultimate aim on the introduction of integrated resorts with casinos remains clear – to grow its tourism & services sector and minimises gambling problems associated with local population. Therefore, the city state’s gaming tax regime provides better incentive for high-roller operation.

But why it takes so long for the authority to roll out junkets license approval?  One of the major reasons is – It is hard to find strong junkets who are “goodie-two-shoes”.  It is obvious that casinos would not sign up weak junkets (of counter-productive) in order to compromise on their high-roller soliciting power.  Also, in the case of Singapore IR, it is quite possible that some of these junkets endorsed by Genting RWS might not meet the full requirement of CRA.  In that, their background funding parties are rather secretive.  That will cause a big alarm on money laundering. 

Regardless, the growth rates for the casino mass market will dwindle down pretty fast over the next few years. Mass market typically reaches its ceiling in shorter time and casinos need continuous feed from the junket players (high-rollers) to continue grow their business.  Macau is a classic example of stagnated mass market and heavily relying on VIP gaming turnover. 

The fact remains that Singapore casinos NEED junkets to grow the casino revenue pie, as well as to mitigate huge credit risk exposure to be a sustainable business model. So it is not true that Singapore IR can rely on mass market alone or direct premium players (like what MBS claims) to be hugely profitable. 

For the IR to hit a total casino revenue of close to 25% of Macau’s, casino operators need junkets.  Once the VIP gaming market takes off successfully, the authority may start to revise upward the Local Entrance Levy (for locals) to the casinos. 

But the Catch 22 is: Can Singapore finds enough strong junkets to boost IR’s high-roller market and yet these are the goodie-two-shoes Junkets?  Time will tell…

 Above:  Press reported casino revenue figures

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